Final rites for Abiku Discos?

Samuel Adesanya

17 Oct 2017

For the tribe of those, of which yours truly is included, that have long called for a comprehensive review of the power sector privatisation, the suggestion that the federal government is finally mulling the option can only be a vindication of sorts. Responding to a request by Tony Elumelu, the billionaire chairman of Heirs Holding – an operator in the power sector – for a fresh injection of funds to bail out the electricity sector during one of the plenaries at at the 23rd Nigeria Economic Summit (NES) last week, Vice-President Yemi Osinbajo, spoke the mind of the tribe: transfer ownership to new investors if you can’t get the bsuiness going!

The same point would be echoed to newsmen by Minister of State for Budget and National Planning, Mrs. Zainab Ahmed also in the course of the summit that the government and other stakeholders had come to the realisation that something critical needed to be done quickly in the power sector.

She told the journalists: “The power sector has been privatised but I’m sure every Nigerian can attest to the fact that the privatisation has not worked well, in the sense of what we sought to achieve in terms of power efficiency… We have now come to the point where government which is a stakeholder in the power sector and other stakeholders must come together and decide and cede some of their holdings to new investors that will inject new funding; investors that have the expertise to grow the power sector that will serve Nigerians.”

“It’s a process that is on-going, it involves negotiating with the existing owners and also with the government in deciding the right level of holdings that will go up for another round of sale.

“The privatisation has not worked out. We discovered that many of the companies are indebted to the banks, making it difficult for them to make fresh investments in their infrastructure. All stakeholders must come together to grow the sector, especially in discussing with the existing owners.”

Call it the moment of truth – and you are damned right. The same truth which Power, Works and Housing Minister, Babatunde Fashola, had long admitted but apparently feels too constrained to do anything about. Recall that the minister had earlier in May during the 15th edition of the monthly power sector operators’ meeting in Jos, had attempted to read something of a riot act to the operators. Then he had made it clear that their perennial whining over service and operational issues had become galling: “You must do more to improve service, rather than complain about old infrastructure. I wish to remind you that nobody forced you to buy those assets and you knew what you were buying”. He had equally told them that their cartel – the Association of Nigerian Electricity Distributors (ANED), had no place in the process noting that his ministry will not deal with it “because the Bureau of Public Enterprises (BPE) acting for the National Council on Privatization (NCP) did not contract the asset sales and performance agreements with an association and neither did Nigerian Electricity Regulatory Commission grant you licenses as an association.”

But then, those were not the only issues dealt with at the May monthly meeting of the operators. In addition to the recurring issue of the failure of the operators to provide their customers with prepaid meters, the other sticky issue was their claim to exclusivity rights in their distribution areas. A case in point is Enugu Disco which sought to contest the space with the 188-megawatt Geometric Power, Aba at a time the same Enugu Disco could not guarantee basic services to households in the East. Fashola made clear that he could not understand the logic of “standing in the way of a consumer seeking to get for himself what the service provider, Disco, has failed or is unable to give them”.

The untold story of course was that the Discos wanted more for doing less. They wanted to call the shots even when there was yet no proof that they had invested a dime to improve the sector; higher tariffs on the old billing methodologies that robbed Peter to pay Paul; assurances that the ultimate guarantor would always watch their backs irrespective of whether or not they fulfilled their basic service obligations to customers. Finally, despite being private entities, they craved for a system that sees nothing wrong with being permanently hooked on government life support.

That was some five months ago.

With the latest request, we must thank Elumelu for letting us know that things have not changed. Not that Nigerians routinely dealt a bad card by the inept contraptions described as distribution companies were ever at any point in doubt about how bad things are. The difference this time is that the federal government would appear to be saying – no more; going as far as pushing for fresh hands to move the sector forward.

It comes to a Eureka moment.

More thanks should go to Vice President Osinbajo for letting Nigerians know that there is yet, a third way. Before now, we have heard from no less personality than Minister Fashola that an attempt to review the process that delivered the abiku Discos will not only be counterproductive but would set the nation back by several years. Remember the same wearisome arguments about negative signals being sent to investors – the god of process that slips into the sleep mode when public interest is about to be mangled but automatically kicks in each time the government steps in to right the wrongs of the injured citizen? Did you say only in Nigeria?

Have the actors on the privatisation divide finally come around to agree that the exercise has served neither party well? Possibly. While those on the receiving of the daily deteriorating service affirm that the exercise has yielded no appreciable investments to raise expectations of possible upgrade in capacity or improvements in service thresholds either now in the foreseeable future, the investors have also realised that Discos are not the pots of fortune they had thought it would be. A difficult if not a hopeless marriage if ever there was one.

Salvage is of course not impossible. By this I mean a win-win for both sides. With the federal government holding 40 percent equity, the task would seem as simple as persuading a club of non-performers to shed a sizeable chunk of their holdings to a proven core investor. That way, everyone, hopefully, wins!

As for possible resistance, with many of the operators already in serial breaches of the various Service Level Agreements, persuasion shouldn’t be an entirely difficult proposition. It is about finding the process!